Transcription
August volatility is officially back, and there could be a massive opportunity to bank both ways in the next couple of months. We definitely don't want to miss these opportunities, as we are seeing huge ranges. Some of the indices have broken structure. This is the Dow Jones, for instance, and we are seeing massive intraday moves where the indices will be up by a percent and then give all of those gains back during the same day. But if we get a drop within the next two months, as you can see here, it is very uncommon that we get both a green August and September. These are the two rockiest months in the stock market. However, if we do get a drop, this will all just be a setup for us to load up on some cheap stocks that we want to own or add to our positions for the years to come. And I'm going to also share with you some data in this video why you should not be afraid to buy the dip, in my opinion.
So, in this video, we're going to discuss the huge opportunity to try to bank both ways in the market based on the technicals that we are currently seeing, and is the market losing steam? We have August, September seasonality coming up. Uh, tariffs, which we haven't even addressed because really, nobody believes the Trump administration anymore as it relates to tariffs. But there is a new wave of chip tariffs that are possibly as high as 100% coming down, potentially next week, according to the Trump administration. We're going to be discussing the bad data, specifically with regards to the jobs data. We had jobs numbers come out today. Unemployment claims, the worst number since 2021. Now, that means that this will likely force the Fed to cut come September 17th. However, the market doesn't like it when the Fed is forced to cut. The market likes it when the Fed cuts when everything is smooth. If the market interprets that the Fed is forced to cut, this is when we start to get jitters. And we also had a weak Treasury auction this week. I also want to go over some extremely interesting stats as it relates to the VIX and how we virtually have a VIX pop every August and or September, and how I'm positioned here to play any VIX pop that comes our way within the next two months. I have an extremely cheap trade and a way to potentially 4x my money if I'm right, or if I'm wrong, which is highly unlikely based on data. Take a very small hit. I'm not saying that it's highly unlikely that I'm wrong. I'm just talking about this specific trade. And like I said, I want to share with you some data why I'm still going to buy any dips heavily and why I'm confident to do so. So, I will go over my stocks and my trades towards the end of the video. But first, I just want to shout out some Traveling Trader Academy members here because they have been putting in a ton of work. This user, sippy cups and stocks, up 55K. She says, "If a mom of a toddler in her 30s with a full-time job can make 50K, so can you." Another trader putting in a ton of work, her portfolio is up 43%. And frankly, in my humble opinion, this is one of the differentiating features of our academy. Not only do I day trade every morning, some users don't day trade. Some users are in it for the swing trades, like this user. And some users are just looking for deep technical and fundamental analysis on stocks that they want to own at dollar cost averaging levels that are optimal. And this last user says, "This year's growth I never saw in my 12 years of trading, up 56% this year, clearly beating the S&P 500." So if you want to join the Traveling Trader Academy, just hit up wop.com/thetravelingtrader. Let's get right into it.
All right, so what is my plan to bank in both directions here? So, as you guys know, I've talked about August seasonality, August and September seasonality, right? It doesn't mean that the minute that August 1st strikes, that that means the market is going to tank. However, we did have our first structural break. If you look here on the left, I have the SPY. On the right, I have the Dow Jones. We did have our first structural break. It is much more clear on the Dow Jones. Now, why do I bring up the Dow Jones? I'll tell you in a second, but the Dow Jones could be a leading indicator and has often been a leading indicator of the S&P 500. Now, there's only been three times in history that we had an all-time high close and then three red days in a row. This just happened here. This also happened in February of 2025. And this also happened in July of 2024. We obviously dipped below the 20-day moving average for the first time on the S&P 500 in over 70 days. And we are now just riding the 20-day moving average. It's not a surprise that we are sitting at this level consolidating here. And this is where we are now seeing a ton of intraday volatility where either the day opens up and we just see a massive green candle, or we start the day really green and then end red, as we did today. However, the Dow Jones has, as a matter of fact, not only broken structure but has retested the 20-day moving average as resistance. It is the first index to do so. We saw the same thing back in February of 2025 when the S&P 500 was still over the 20-day moving average. The Dow Jones had already broken below it, retesting the 20-day moving average. And by the way, the Dow Jones and the S&P 500, if you look at just larger trends, they do have the same chart pattern. Now, if you look at August 2023, the S&P 500 was the one that gave the signal first. So my point is that when we look at the S&P or the Dow, the Dow basically contains 30 stocks, right? So the Dow is a much more concentrated index, but the stocks in the Dow are also the stocks in the S&P 500. And the market tends to move in tandem, at least the big indices, Dow, NASDAQ, and S&P 500. You could see how they are separate from indices like the Russell 2000, which mostly cover small caps.
Now, could the S&P 500 come into this gap, use it as support, and make a new high before seeing more rockiness or sideways action? Yes, absolutely. As a matter of fact, just because we see volatility doesn't mean we have to see a sharp drop immediately. You remember the volatility that happened after the election when all of December and January, it just seemed like we were teetering here at the top. We could see something similar for the S&P 500 during the month of August, but as I've shown you here, we rarely get a smooth August and September. Usually, one or both of those months tend to be rocky. Another data point that can help us confirm the August, September seasonality as it relates to volatility. I just took a look at the max VIX spike. That is the highest spike of the VIX in the last six August and September. And if you take a look at this, last August, September was the max VIX spike was 65. 2023 was the start of a new bull market coming out of the bare market of 2022. So the max VIX spike was 20, still pretty high, higher than we are today. The year before that, 35. The year before that, 29. The year before that, 38. The year before that, 25. So even when we have relatively stable months or relatively stable years, we still get a pretty high VIX spike. As a matter of fact, the average VIX spike in August is 18% with a 70% hit rate of making an interim high during the month of August.
Now, on the news front, we saw the Trump administration come out this week and say that they are planning new chip tariffs next week as high as 100%. And they are trying to incentivize chip makers to make chips in the United States. Obviously, this is easier said than done. Most chips are made in Taiwan. And after earnings on a company like AMD, which does have a high tariff exposure, we saw a massive drop the day after earnings. And it is because AMD said that their margins came in lower than expected, partly due to tariffs and restrictions from selling to China. Now, none of us really know how serious the Trump administration is on these. It could again just be another bargaining chip in getting companies like AMD and Nvidia to say, "Okay, okay, we're going to try in the coming years to shift focus away from Taiwan," and that could be enough for the Trump administration to give them a reprieve. We don't really know, but it's not a surprise to me that this is happening during August. And obviously the non-chip tariffs, the rest of the tariffs that were talked about supposedly went into effect today as of August 7th. And before I get into the stocks that I'm looking at, as well as some of the trade examples, I do want to just talk a little bit more about uh the bond auctions and about jobs numbers. The bond auctions came in weak. I don't want to go into the details. You can read them here, but the 10-year and 30-year bond auctions were considered pretty weak auctions. Now, unemployment claims came in at 226,000 compared to an expectation of 221,000. And you can see now the chances of a Fed rate cut are sitting at around 93% for September 17th, which means they are going to cut rates. Mark my words, they are not going to just sit on their hands. Right now, the jobs numbers are starting to look a little bit concerning. And so, the Fed has to try to act preemptively. But now the market is going to interpret this as the Fed needing to cut rates because they actually are late again. And with all that said, the seasonal data, the VIX data, the news that we just discussed, as well as the technical pattern that we see here, the fact that the Dow has often led the S&P 500 and the Dow here definitely looks like a break and retest for a potential bearish move. I think it is prudent to think about some hedges here in case we get some consolidation, maybe even a little pullback, and try to make money off of some of these shares that we bought back in April and May. And one of the best ways to do that is by selling covered calls. You can see here I sent out a slew of new covered call alerts. I sold covered calls on Google, on AMD, as well as against Nvidia. Now, I'm happy if these covered calls get assigned and I sell my shares for much higher than the stock prices are today. So, for instance, my AMD covered call, if that gets assigned, I'll be selling my AMD for over $22. I'll be selling my Google for over $216. I'll be selling my Nvidia for over $27 if these get assigned. If not, I keep all of the money that I sold these covered calls for.
Now, in terms of the VIX, based on the data, I actually think this is an asymmetric play. And I think that one could hold a cheap hedge on the VIX. And especially if you don't want to or can't sell calls, it is a much cheaper way of hedging against any volatility that we might see in August or September. Now, I don't want to buy VIX calls outright. VIX calls are extremely expensive, and you will be penalized if you are wrong. However, I do want to hold a longer-dated VIX hedge going into September because like I said, it's not like the market is likely to hit August and then just tank from there. We've seen months where August is flat and September is a bloodbath, where August is a bloodbath and so is September, where August is green and September is a bloodbath. So, you know, I want to maintain a cheap VIX hedge to capture any pops, any unexpected pops that we see, especially since news tends to affect the market a lot more during this lull in volume during the summer periods, which is why we tend to see a ton of volatility. So, one way to hold a cheap VIX play is by doing a debit spread. For instance, one that expires August 17th or sorry, September 17th. I have the 2025 call debit spread on the VIX. And if we do see a pop in the VIX anytime between now and the beginning of September, then I will likely capture some, I will capture a good amount of money on that VIX play. Now, if by the beginning of September we don't see a VIX pop, then I will likely roll that VIX play into the end of September or into October.
Now, let me give you some reassuring data, at least what I'm looking at and why I'm excited to buy dips and why I think that there is a huge opportunity coming in the next couple of months if we do get a significant pullback. So, we are now approaching year three of this bull market. And here is the data on all of the bull markets that have made it past two years. The shortest one is five years. We saw that in 1987 and we saw that in 2007. However, typically they do last much longer, especially after passing their second year. And we are now approaching, if we take a look here, we are now past the median duration. And when cyclical bull markets do pass this median duration, they tend to last for much longer. And you can see here that the median magnitude, we are right on par with where we should be for bull markets. So, you can see here that the median is 30 months and 90%. Shout out to Jurian Trimmer or Timmer. I just want to give this person some credit. And if we isolate this to semiconductors, you can see here that historically, I mean, this data goes back to 1995 when semiconductors have a four-month streak like this. We are 18 and 0 with an average of 13.12% higher on the semiconductor index six months later. So, I do think that the bullishness will continue, and I really welcome any pullbacks we get here if we do get one, and hopefully we do. And this is not unwarranted. This is one of the best earning seasons in history. Certainly the best earning season in the last few years. 63% earnings beats. So, it's not like we're just going up based on nothing. But that also means, unfortunately, there isn't a ton of value here. I've been giving you guys my play since April. I gave you my buys on the S&P, on QQQ, on SOXL. I gave you my buys on Uber. I gave you my buys on Nvidia. I gave you my buys on Google. I gave you my buys on Amazon. Even recently, I told you that this Apple breakout smells like news was coming. And we did get news that Tim Cook is now has pledged to the United States and to Donald Trump a significant investment in the US. And we have now seen an 8% pop in two days because of it. Apple was really the last stock that was lagging that you could have picked up in the MAG 7. Tesla is obviously coiling in this pennant. This is not a bullish or a bearish pennant. It is just a pennant. And I think there will be an easy play either way to see where we break, whether we break to the downside and retest or break to the upside and retest. But as I told you in my last video, I want you guys to mark out the 50% of the range from April. And if your favorite stocks fall in those ranges, at least set alerts. So you can see here, SMCI after earnings fell to that 0.5 range. However, based on my technicals, I am waiting for these equal lows to get taken out, maybe in the golden pocket below $40. I'm eyeing this potential pullback on SOXL. We have now crawled into this daily fair value gap, but I want to see if we can break structure, continue to break structure on SOXL. We already did break structure, but I want to see us break this and retest it. And I think that there will be an opportunity to pick this up below $20. In my opinion, would be an absolute steal. There is some value in the healthcare sector. My the healthcare sector XLV, which is the healthcare sector of the S&P 500, finally got to my trendline target here in the 120s. I do not think that this will be a major money maker in the short term. I think this is long-term value here. You know, same thing goes for United Healthcare. I do think United Healthcare is going lower. I told you guys that my target is at 200 or below. I still think there's an opportunity in Dell. I told you guys that Dell is my sneaky AI AI play, and I think Dell will be going up much higher in the coming years, in my opinion. But for sure in the next couple of months, I'm going to be eyeing the stock market like a hawk because I do want to add to my shares or grab stocks that I haven't picked up enough of. And I definitely will be sending the full range of my alerts in the Discord in the Traveling Trader Academy. Hopefully, I broke things down for you, gave you some pertinent data that you can use for your own analysis and your own decision-making. That is the goal of this channel at the end of the day. And if you want to trade live with me every single morning, that link is in the description. If you want access to all of my trades, same link in the description, all of my investments, my stock analysis, my fundamental and technical analysis as well, what stocks I'm looking at, when I'm when I start adding to my positions. I send out all of that information. I'm transparent about all the moves that I make. Subscribe to the channel. Hit that notification bell. Stay safe out there, traders. Peace.